Welcome to the fourth Carnival of Lean Leadership. There’s a lot of material to cover this time, so we’ll get right to it… The highlight of the past week has been the blogfest on project kaizen by The Gang of

I went and looked for that entry; I couldn’t find it either. I think Hal Macomber will be indexing the entries at http://projectkaizen.com/. Also, Hal tells me that they’ll be putting the entries into a book. If you find that entry, please update me.

I confused by seemingly conflicting statements in Kathleen’s post, though. she says:
” I do not believe the larger the company, the greater the profit; I believe the opposite is true”
but then also says: “For example, this is why you’d hire stitchers to sew for you in-house rather than hiring a contractor -if it were possible- because there are extra costs in hiring others to do a job for you than it would cost doing it yourself.”

A company with one designer and everything outsourced would be smaller than a company with one designer/purchasing agent, a pattern maker, a cutter and 3 stitchers (only grading and marking is outsourced). So does the designer who outsources everything make a greater profit despite all the extra transaction costs? Or are you determining company size by something other than # of employees?

I didn’t make it clear. There is also a limit to “smallness”. For example, I’ve found that for the first person a designer hires to work in house, their sales increase by about 1000% percent. Yeah, really. There are similar -but decreasing percentages- increases for additional workers added, up to the point of 19 people. Also, I do not agree with the way that companies are measured in terms of profitability. I prefer to look at sales per employee; I find that is a better measure of smaller companies (and favors them) than in terms of total sales. I was uncertain how to account for contractors in the profitability mix but I believe that the number of hours they work on a project must be considered and approximated into an employee headcount.

What I am trying to say is that even a “designer who outsources everything” will “make a greater profit despite all the extra transaction costs” as compared to drafting, cutting and sewing everything on his/her own. At the level of one employee (one’s self) a designer is spread too thin. With a contractor (hours worked calculated/configured to represent employee headcount) one is able to get out a lot more product and consequently, sales.

Regarding transaction costs; let’s say the contractor’s hours worked out to represent 4 people. If the designer were able to hire 4 people to work in house, there would be lower transaction costs than with the contractor. In spite of that, I recommend that a designer hire contractors at the outset if possible because while there are additional costs in the form of transactions, one is learning from an established work entity and I prefer to describe those additional costs as “tuition” for education. Having worked with a contractor first means one is less likely to make errors common to the process of reinventing the wheel. Similarly, one would have learned to avoid situations that were the cause of errors when working with the contractor, once one sets up their production in house.

Lastly, there’s something else to consider. Contractors provide flexibility and as with all benefits, there is a cost for that as well. The flexibility contractors provide is that one is not forced to produce a line every season because one is not having to worry about pushing out product in order to satisfy payroll. If you have payroll, most owners feel a responsibility toward their workers to provide jobs because they know people are counting on them (trust me, once you hire someone, you’ll begin to feel the weight of this yoke) and also, you know you’ll be wanting them to work for you next season (in the event you skip a season) and workers are less likely to return to work for you -unless they have no other options- if you’re only offering seasonal or sporadic employment. This flexibility means you won’t have to produce a product line if you’re weathering personal difficulties or having a design block. While it’s not optimal to miss any seasons once you start, it’s better to do that than to put out uninspired products just because you have obligations to meet. A lot of designers have “dried up” under those kinds of pressures.

One of the other 7 kaizen bloggers posted a fabulous article on monday (sorry, I don’t rememebr which blogger!) about how to create these networks for REAL: the author called it the oobeya (big room).

The article had an image of the room where short, frequent meeting were held, with people from all departments invited. Each wall has a diagram, sketch or other image representing the product, development process, etc. (The Japanese have kaizen down–not only are the products kaizened, but the processes by which the products are made and the processes by which the development process is organized. all at the same time, in the same room.)

On the diagrams, I saw all these yellow and red squares and thought “what the hell do those symbols mean?” Turns out they weren’t symbols, they were depictions of the sticky notes any member can post to indicate a potential or real problem they see. red= critical, yellow=potential. This is SO COOL, because everyone can simultaneously raise their issues, and everyone can SEE where problems are occuring, and all the departments are in the room, so if a problem needs action by 3 departments, they all know that at once.

Of course, this assumes that you have in-house departments.

If the out-sourced version of informal networks is exchanging phone numbers (I have less faith in the effectiveness of this than Kathleen, mostly because I’m a great problem solver, but I hate making phone calls), what is the outsourced version of the oobeya? It has to be simple to use, visual, & easy to access by everyone at the same time.

I confused by seemingly conflicting statements in Kathleen’s post, thoug.
she says:
“ I do not believe the larger the company, the greater the profit; I believe the opposite is true”
but then also says:
“For example, this is why you’d hire stitchers to sew for you in-house rather than hiring a contractor -if it were possible- because there are extra costs in hiring others to do a job for you than it would cost doing it yourself.”

A company with one designer and everything outsourced would be smaller than a company with one designer/purchasing agent, a patternmaker, a cutter and 3 stitchers (only grading and marking is outsourced). So does the designer who outsources everything make a greater profit despite all the extra transaction costs? Or are you determining company size by something other than # of employees?